The concept of unlimited paid time off (UPTO) has been a topic of discussion in workplace conversations since the early 2000s. What began as a bold alternative to rigid vacation policies — initially championed by startups and tech firms — quickly became a symbol of modern workplace culture. Over the years, it has gained traction, sparked debates and prompted a steady stream of HR think pieces, all attempting to determine whether the promise of autonomy materializes in practice. While some organizations have adopted it to attract talent and simplify administration, others have questioned whether it is genuinely beneficial or just good optics. UPTO policies sound generous and progressive, offering employees the freedom to take time off as needed, without a formal cap. In practice, a truly unlimited PTO plan removes accruals altogether. There is no balance to track, no carryover into the new year and typically, no payout at separation. Employees are trusted to take time off as needed, provided business needs are met. These policies often merge all leave types (vacation, sick, personal) into a single, flexible benefit. And while “unlimited” sounds absolute, most employers still impose boundaries around extended leaves and require manager approval. So, while “unlimited” PTO may be untracked, it is not without rules, and employees are usually very aware of the boundaries. A Look Back: Growth, Hype and Now a Plateau The early 2010s marked a sharp rise in organizations experimenting with UPTO, particularly in high-growth industries like tech and finance. According to Employers Council’s 2018 survey, there was a 25% increase in organizations offering UPTO between 2016 and 2018. Fast forward to 2024, and the trend appears to be cooling. Only 7% of U.S. employers currently offer UPTO, down from 8.8% of job postings in 2022. Some organizations are reversing course, moving back to structured and limited policies in response to employee confusion, administrative headaches, compliance concerns and evolving state leave laws. Do Employees Take More Time Off? A central fear among employers offering UPTO has always been overuse. The data tells a different story. • Cloud-Based HR Platform Namely’s 2017 HR Mythbusters Report: Employees with UPTO took an average of 13 days off, compared to 15 days for employees with capped vacation. • Empower Financial Services’ 2024 Research: UPTO employees took 16 days off, only slightly more than the 14-day average in traditional plans. Cultural factors — such as fear of judgment or concerns about workload — seem to outweigh policy generosity. Many employees underuse the benefit, often feeling guilty for taking time off or unsure about what is “acceptable.” Nearly 70% of employees admitted to working during vacation, and half check email regularly while away. Despite its shortcomings, UPTO remains a top-ranked benefit. Empower reports that: • 43% of employees believe every organization should offer UPTO. • 26% would consider a lower-paying job if it came with UPTO. • 19% would not accept a new job unless this benefit was offered. Employees are drawn to the perception of autonomy, flexibility and trust, even if the policy itself does not result in employees taking significantly more time off. Legal and Compliance Hurdles: The Catch What seemed like a simple swap — ditch accruals and hand employees the keys to their calendars — has proven to be anything but simple. The legal landscape has become increasingly complex, and employers must exercise caution. 1. State and Local Sick Leave Laws States like Colorado, California and New Mexico require employers to provide a defined number of paid sick leave hours, with specific conditions for documentation. These From Hype to Headache? THE HR AND LEGAL STATE OF UNLIMITED PTO By Chelsea Jensen, SHRM-CP, PHR, and Edward Encinias, Esq. Colorado Banker 6
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